Across leading African economies, the wind of economic optimism is blowing quietly. The optimism stems from the new generation of consumers now emerging across the continent. The purchasing power of these emerging consumers is positively different from what was obtainable in Africa a decade ago. In Nigeria, for instance, the collective buying power of households earning $1,000 to $5,000 a year doubled from 2000 to 2007, reaching $20 billion. Nearly seven million additional households have enough discretionary income to take their place as consumers as observed by Mckinsey report on Africa in 2010. By 2014, the number of such households across Africa could reach 106 million.
Africa’s labour force is a key source of this new generation of consumers. Productivity is expanding, in contrast to what is happening in much of the rest of the world. The continent has more than 500 million people of working age. By 2040, their number is projected to exceed 1.1 billion—more than in China or India—lifting GDP growth. Over the last 20 years, three-quarters of the continent’s increase in GDP per capita came from an expanding workforce, the rest from higher labour productivity. According to a Mckinsey report, Africa’s consumer-facing sectors are growing two to three times faster than those in the OECD countries.
What are the factors empowering African Consumers?
The key factors that have contributed to the growth of new army of consumers in the continent include the African Government’s deliberate strategy to adopt policies designed to energise and open business space across markets. Many African countries have started privatising state-owned utilities, reduced restrictions on international trade, and strengthened regulatory and legal systems.
The paradigm shift across the continent opened the door for foreign investors to enter business sectors previously crippled by decades of Government monopoly. In the last decade, many African countries privatised their telecommunication/ICT sectors. Since the privatisation, teledensity in Africa has experienced exponential growth delivering over half a billion mobile phone subscribers and thousands of new jobs in less than a decade.
How to connect with consumers
- Arrive early and take a long-term view: If a company is to succeed in Africa, it must discard short-term approach and create a sustainable long-term plan critical to business success in Africa.
- Build relationships with stakeholders: Establishing relationships with key stakeholders is a reality to starting business in Africa. Many Africans are hospitable and receptive to foreigners. Having a good business relationship with key stakeholders is essential to build confidence and mutual understanding
- Find the right local partner: Finding a local partner is very important in Africa. Both small and multi-national companies aspiring to enter Africa need a reliable local partner to succeed. The local partner brings immediate access to excellent political and business relationships, as well as expertise in managing local labour and regulations
- Market entry research: It is very essential for new entrants into Africa market to get true picture of the destination. Market research is not desktop Google- research but in-depth market intelligence done by experts in the local market. Such market research gives new entrants a clear road map of the business sector indicating opportunities in the sector, business culture, competitive analysis, preferred location and government regulations among others.
- Market risks analysis: New businesses above all must consider market risks as a key factor. The information is expected to define immediate and on-going risks in the nominated business venture. African economies have risks unique to each country, as such, one-shoe fits all approach does not work in the continent. OctoberFirst Consulting can assist you with all of the above.
Africa-Australia Infrastructure Conference 2012
While you are here, we will appreciate if you could view the website of our upcoming international event, Africa-Australia Infrastructure Conference 2012:
The Conference is a 2-day event designed for Australasian investors and developers aspiring to invest in growing infrastructure opportunities in Sub-Saharan Africa.
The Conference will be held in Sydney (venue TBA) on Monday 3 and Tuesday 4 September 2012. Your views and comments on the Conference would be most appreciated.